FinMin slaps ₹5.5 cr fine on Paytm Payments Bank for violations of money laundering rules

The Ministry of Finance’s Financial Intelligence Unit-India (FIU-IND) has imposed a monetary penalty of ₹5.49 crore on Paytm Payments Bank Ltd for the violations of the Prevention of Money Laundering rules.

A ministry statement says FIU-IND initiated a review of the Paytm Payments Bank Ltd after receiving specific information from law enforcement agencies that few entities and their network of businesses were engaged in a number of illegal acts, which includes organising and facilitating online gambling.

“Further, the money generated from these illegal operations, i.e. proceeds of crime were routed and channelled through bank accounts maintained by these entities with the Paytm Payments Bank Ltd,” the ministry says.

FIU IND had also issued a compliance show-cause notice to the bank for its violations of the money laundering and other rules. After considering Paytm Payments Bank’s submissions, the charges against Paytm were substantiated, and a penalty worth ₹5,49,00,000 was imposed on the company.

In another development, the One97 Communications board has finally discontinued various inter-company agreements with Paytm Bank, the company says. On February 27, 2024, Paytm founder and CEO Vijay Shekhar Sharma had also stepped down as part-time non-executive chairman and board member at Paytm Bank.

"One 97 Communications Ltd (Paytm) and PPBL announce additional measures to pursue independent future plans - Paytm and PPBL have mutually agreed to discontinue various inter-company agreements One 97 Communications Ltd (Paytm) would like to inform that the Company and its associate entity, Paytm Payments Bank Limited (PPBL), have introduced additional measures to strengthen their approach towards independent operations of PPBL," an exchange filing shows.

Notably, One97 board on February 12, 2024, had formed a committee to work with its board to strengthen compliance following the RBI's decision against Paytm Bank. It formed a group advisory committee chaired by former SEBI chairman M Damodaran to work with the Board in further strengthening compliance. One97 has also withdrawn its nominee from the Paytm Bank board, and its future business will be led by an all-new board.

Now, as part of the company's effort to reduce dependencies, both companies have “mutually agreed to discontinue” various inter-company agreements with Paytm and its group entities. Paytm Payments Bank, 51% owned by Sharma while the remaining 49% by One 97, has been barred from accepting further credits into its customer accounts and wallets after March 15, 2024.

The One97 board approved the termination of agreements and amendment of shareholders' agreement on March 1, 2024. It earlier announced it would sign up new partnerships with other banks and take measures to provide seamless services for its customers and merchants.